SF 2866

as introduced - 91st Legislature (2019 - 2020) Posted on 05/14/2019 10:11am

A bill for an act
relating to health care; increasing the surcharge for hospitals and health maintenance
organizations; increasing the premium tax for for-profit health maintenance
organizations; amending Minnesota Statutes 2018, sections 256.9657, subdivisions
2, 3; 256B.69, subdivision 5i; 297I.05, subdivisions 1, 2, 5.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2018, section 256.9657, subdivision 2, is amended to read:

Subd. 2.

Hospital surcharge.

(a) Effective October 1, 1992, each Minnesota hospital
except facilities of the federal Indian Health Service and regional treatment centers shall
pay to the medical assistance account a surcharge equal to 1.4 percent of net patient revenues
excluding net Medicare revenues reported by that provider to the health care cost information
system according to the schedule in subdivision 4.

(b) Effective July 1, 1994, the surcharge under paragraph (a) is increased to 1.56 percent.

(c) new text begin Effective July 1, 2019, the surcharge under paragraph (a) is increased to ... percent.
new text end

new text begin (d) new text end Notwithstanding the Medicare cost finding and allowable cost principles, the hospital
surcharge is not an allowable cost for purposes of rate setting under sections 256.9685 to
256.9695.

Sec. 2.

Minnesota Statutes 2018, section 256.9657, subdivision 3, is amended to read:

Subd. 3.

Surcharge on HMOs and community integrated service networks.

(a)
Effective October 1, 1992, each health maintenance organization with a certificate of
authority issued by the commissioner of health under chapter 62D and each community
integrated service network licensed by the commissioner under chapter 62N shall pay to
the commissioner of human services a surcharge equal to six-tenths of one percent of the
total premium revenues of the health maintenance organization or community integrated
service network as reported to the commissioner of health according to the schedule in
subdivision 4.

(b) new text begin Effective July 1, 2019, the surcharge under paragraph (a) is increased to ... percent.
new text end

new text begin (c) new text end For purposes of this subdivision, total premium revenue means:

(1) premium revenue recognized on a prepaid basis from individuals and groups for
provision of a specified range of health services over a defined period of time which is
normally one month, excluding premiums paid to a health maintenance organization or
community integrated service network from the Federal Employees Health Benefit Program;

(2) premiums from Medicare wraparound subscribers for health benefits which
supplement Medicare coverage;

(3) Medicare revenue, as a result of an arrangement between a health maintenance
organization or a community integrated service network and the Centers for Medicare and
Medicaid Services of the federal Department of Health and Human Services, for services
to a Medicare beneficiary, excluding Medicare revenue that states are prohibited from taxing
under sections 1854, 1860D-12, and 1876 of title XVIII of the federal Social Security Act,
codified as United States Code, title 42, sections 1395mm, 1395w-112, and 1395w-24,
respectively, as they may be amended from time to time; and

(4) medical assistance revenue, as a result of an arrangement between a health
maintenance organization or community integrated service network and a Medicaid state
agency, for services to a medical assistance beneficiary.

If advance payments are made under clause (1) or (2) to the health maintenance
organization or community integrated service network for more than one reporting period,
the portion of the payment that has not yet been earned must be treated as a liability.

deleted text begin (c) deleted text end new text begin (d) new text end When a health maintenance organization or community integrated service network
merges or consolidates with or is acquired by another health maintenance organization or
community integrated service network, the surviving corporation or the new corporation
shall be responsible for the annual surcharge originally imposed on each of the entities or
corporations subject to the merger, consolidation, or acquisition, regardless of whether one
of the entities or corporations does not retain a certificate of authority under chapter 62D
or a license under chapter 62N.

deleted text begin (d) deleted text end new text begin (e) new text end Effective June 15 of each year, the surviving corporation's or the new corporation's
surcharge shall be based on the revenues earned in the previous calendar year by all of the
entities or corporations subject to the merger, consolidation, or acquisition regardless of
whether one of the entities or corporations does not retain a certificate of authority under
chapter 62D or a license under chapter 62N until the total premium revenues of the surviving
corporation include the total premium revenues of all the merged entities as reported to the
commissioner of health.

deleted text begin (e) deleted text end new text begin (f) new text end When a health maintenance organization or community integrated service network,
which is subject to liability for the surcharge under this chapter, transfers, assigns, sells,
leases, or disposes of all or substantially all of its property or assets, liability for the surcharge
imposed by this chapter is imposed on the transferee, assignee, or buyer of the health
maintenance organization or community integrated service network.

deleted text begin (f) deleted text end new text begin (g) new text end In the event a health maintenance organization or community integrated service
network converts its licensure to a different type of entity subject to liability for the surcharge
under this chapter, but survives in the same or substantially similar form, the surviving
entity remains liable for the surcharge regardless of whether one of the entities or corporations
does not retain a certificate of authority under chapter 62D or a license under chapter 62N.

deleted text begin (g) deleted text end new text begin (h) new text end The surcharge assessed to a health maintenance organization or community
integrated service network ends when the entity ceases providing services for premiums
and the cessation is not connected with a merger, consolidation, acquisition, or conversion.

Sec. 3.

Minnesota Statutes 2018, section 256B.69, subdivision 5i, is amended to read:

Subd. 5i.

Administrative expenses.

(a) Administrative costs paid to managed care plans
and county-based purchasing plans under this section, section 256B.692, and section 256L.12
must not exceed 6.6 percent of total payments made to all managed care plans and
county-based purchasing plans in aggregate across all state public health care programs,
based on payments expected to be made at the beginning of each calendar year. The
commissioner may reduce or eliminate administrative requirements to meet the administrative
cost limit. For purposes of this paragraph, administrative costs do not include premium
taxes paid under section 297I.05, deleted text begin subdivision 5 deleted text end deleted text begin , deleted text end provider surcharges paid under section
256.9657, subdivision 3, and health insurance fees under section 9010 of the Affordable
Care Act.

(b) The following expenses are not allowable administrative expenses for rate-setting
purposes under this section:

(1) charitable contributions made by the managed care plan or the county-based
purchasing plan;

(2) compensation of individuals within the organization in excess of $200,000 such that
the allocation of compensation for an individual across all state public health care programs
in total cannot exceed $200,000;

(3) any penalties or fines assessed against the managed care plan or county-based
purchasing plan;

(4) any indirect marketing or advertising expenses of the managed care plan or
county-based purchasing plan, including but not limited to costs to promote the managed
care or county-based purchasing plan, costs of facilities used for special events, and costs
of displays, demonstrations, donations, and promotional items such as memorabilia, models,
gifts, and souvenirs. The commissioner may classify an item listed in this clause as an
allowable administrative expense for rate-setting purposes, if the commissioner determines
that the expense is incidental to an activity related to state public health care programs that
is an allowable cost for purposes of rate setting;

(5) any lobbying and political activities, events, or contributions;

(6) administrative expenses related to the provision of services not covered under the
state plan or waiver;

(7) alcoholic beverages and related costs;

(8) membership in any social, dining, or country club or organization; and

(9) entertainment, including amusement, diversion, and social activities, and any costs
directly associated with these costs, including but not limited to tickets to shows or sporting
events, meals, lodging, rentals, transportation, and gratuities.

For the purposes of this subdivision, compensation includes salaries, bonuses and incentives,
other reportable compensation on an IRS 990 form, retirement and other deferred
compensation, and nontaxable benefits. Charitable contributions under clause (1) include
payments for or to any organization or entity selected by the managed care plan or
county-based purchasing plan that is operated for charitable, educational, political, religious,
or scientific purposes, that are not related to medical and administrative services covered
under state public health care programs.

(c) Payments to a quality improvement organization are an allowable administrative
expense for rate-setting purposes under this section, to the extent they are allocated to a
state public health care program and approved by the commissioner.

(d) Where reasonably possible, expenses for an administrative item shall be directly
allocated so as to assign costs for an item to an individual state public health care program
when the cost can be specifically identified with and benefits the individual state public
health care program. For administrative services expensed to the state's public health care
programs, managed care plans and county-based purchasing plans must clearly identify and
separately record expense items listed under paragraph (b) in their accounting systems in a
manner that allows for independent verification of unallowable expenses for purposes of
determining payment rates for state public health care programs.

(e) Notwithstanding paragraph (a), the commissioner shall reduce administrative expenses
paid to managed care plans and county-based purchasing plans by .50 of a percentage point
for contracts beginning January 1, 2016, and ending December 31, 2017. To meet the
administrative reductions under this paragraph, the commissioner may reduce or eliminate
administrative requirements, exclude additional unallowable administrative expenses
identified under this section and resulting from the financial audits conducted under
subdivision 9d, and utilize competitive bidding to gain efficiencies through economies of
scale from increased enrollment. If the total reduction cannot be achieved through
administrative reduction, the commissioner may limit total rate increases on payments to
managed care plans and county-based purchasing plans.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 4.

Minnesota Statutes 2018, section 297I.05, subdivision 1, is amended to read:

Subdivision 1.

Domestic and foreign companies new text begin and for-profit health maintenance
organizations new text end .

Except as otherwise provided in this section, a tax is imposed on every
domestic and foreign insurance company new text begin and for-profit health maintenance organization new text end .
The rate of tax is equal to two percent of all gross premiums less return premiums on all
direct business received by the insurer or agents of the insurer in Minnesota, in cash or
otherwise, during the year.

new text begin EFFECTIVE DATE; APPLICATION. new text end

new text begin This section is effective the day following
final enactment and applies to premium tax returns originally due on or after December 31,
2019.
new text end

Sec. 5.

Minnesota Statutes 2018, section 297I.05, subdivision 2, is amended to read:

Subd. 2.

Township mutual insurance.

A tax is imposed on township mutual insurance
companies. The rate of tax is equal to one percent of gross premiums less return premiums
on all direct business received by the insurer or agents of the insurer in Minnesota, in cash
or otherwise, deleted text begin during deleted text end new text begin in new text end the new text begin calendar new text end year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 6.

Minnesota Statutes 2018, section 297I.05, subdivision 5, is amended to read:

Subd. 5.

new text begin Nonprofit new text end health maintenance organizations, nonprofit health service plan
corporations, and community integrated service networks new text begin ; deposit of revenues new text end .

(a) A
tax is imposed on new text begin nonprofit new text end health maintenance organizations, community integrated service
networks, and nonprofit health care service plan corporations. The rate of tax is equal to
one percent of gross premiums less return premiums on all direct business received by the
organization, network, or corporation or its agents in Minnesota, in cash or otherwise, in
the calendar year.

(b) The commissioner shall deposit all revenues, including penalties and interest, collected
under this chapter from new text begin nonprofit new text end health maintenance organizations, community integrated
service networks, and nonprofit health service plan corporations in the health care access
fund. Refunds of overpayments of tax imposed by this subdivision must be paid from the
health care access fund. There is annually appropriated from the health care access fund to
the commissioner the amount necessary to make any refunds of the tax imposed under this
subdivision.

new text begin EFFECTIVE DATE; APPLICATION. new text end

new text begin This section is effective the day following
final enactment and applies to premium tax returns originally due on or after December 31,
2019.
new text end